Uruguay has a solid democratic tradition, marked by political and social stability, a high literacy rate, a large urban middle class that reflects a relatively even wealth distribution, and an advanced social security system.
According to the World Bank’s Human Opportunity Index, Uruguay has achieved a high level of equality in terms of access to basic services such as education, potable water, electricity, and sanitation.
With average annual growth of 5.8% between 2004 and 2012, Uruguay’s strong economic performance has enabled it to consolidate structural improvements made since the crisis of 2002. These improvements helped Uruguay withstand external shocks, such as the international crisis of 2008-2009. Despite its negative effects and global uncertainty, the annual economic growth rate was 3.9% in 2012 and prospects are promising for 2013.
The good macroeconomic performance was reflected in the labor market, which recorded historically low unemployment levels in 2012 (6.1 %). Moreover, thanks to the vigorous economic expansion and the social policies implemented, there has been substantial progress in poverty reduction. The country, however, needs to ensure that people who managed to exit poverty are not forced back again, while working on specific strategies to strengthen this vulnerable group.
Export markets have diversified in order to reduce de dependency on the country’s main trade partners. At the same time, Uruguay has kept its decreasing trend in public debt-GDP ratio. It has also managed to decrease the cost of its debt, reduce dollarization and extend the maturity profile of its financial commitments.
Notwithstanding the significant progress in debt reduction, debt remains at relatively high levels, and although Uruguay has made progress in trade diversification, its regional partners, especially Brazil, account for a major share of exports, which is a factor of vulnerability. Another factor to be taken into account are inflationary pressures arising from the strong internal demand and the rise in the price of commodities, which the government is seeking to fight through different economic and fiscal policy tools.
A priority for the country is to achieve higher investment levels and improve the competitiveness of its economy, especially with respect to productive capacity and infrastructure.
The World Bank has supported the development process in Uruguay for more than 60 years with a variety of instruments including loans, grants, analytical work, and knowledge sharing.
The Bank’s 2010-2015 Country Partnership Strategy places a heightened emphasis on promoting South-South and North-South cooperation to give Uruguay access to experts on subjects it wishes to pursue, such as management of climate risk in the agricultural sector, and offers its own experts and experience in those areas where it has recognized expertise, with the final objective of involving the country more fully in the international development agenda.
Three years after the implementation of the CPS, the World Bank conducted several public consultations in order to assess work conducted in this stage and identify potential areas for improvement. The information can be found in the mid-term assessment report.
The work program for 2010-2015 is based on four main pillars:
Reducing macroeconomic vulnerability and strengthening public sector administration. This pillar focuses on consolidating achievements in macroeconomic stabilization, fiscal discipline, efficient public expenditure, and reduction of vulnerabilities with respect to the public debt.
Improving competitiveness and infrastructure. Helps Uruguay develop quality infrastructure to expand the economy, while consolidating progress in the investment climate. Among other things, the Bank supports Uruguay’s efforts with studies on competitiveness, support for modernization of the transport infrastructure, and support in the area of water and sanitation.
Protection of the environment, mitigation of the effects of climate change, and strengthening of family farming. Seeks to reduce rural producers’ economic and environmental vulnerabilities, particularly through mitigation of risks associated with climate change.
Greater inclusion and social equity. Strengthens the Bank’s collaboration to improve the coverage and efficiency of social security systems, primary education, and implementation of the public health reform.It supports government efforts to increase equity, quality, and efficiency in preschool and primary education, and activities in the family subsidy program to increase secondary school employment among the program’s beneficiaries.
Currently, Uruguay has an active portfolio of eight investment projects, with total credits of US$204.4 million and one results-oriented project for US$66 million. Additionally, the country’s portfolio has US$520 million in policy development financing to mitigate the risks of potential external turmoil. Supplementing Uruguay’s project portfolio are grants by US$3.6 million.
For the past 62 years, the World Bank has worked with the various Uruguayan governments in areas such as infrastructure, transport, agriculture, natural resources, education, sanitation, or health. In terms of outcomes, this has meant, for example, 12,300 new water connections in 12 cities; three treatment plants in Minas, Treinta y Tres, and Durazno, which supply 60,000 people; and 5,300 Uruguayan farmers with greater productive capacity, among others.
Since 2010, more than US$820 million in loans have been approved to fund investment projects in infrastructure, agriculture, environment and institutional strengthening, with the aim of improving the Government’s capacity to protect the most vulnerable groups from external economic shocks through contingent funding.
Additionally, the World Bank has provided analytical and technical support to consolidate the reforms aimed at improving public spending efficiency, expanding the coverage and enhancing the targeting of social programs, and increasing the country’s financial inclusion.
The successful results of the following projects reflect the World Bank’s work with different sectors in Uruguay:
Integrated Natural Resources and Biodiversity Management Project. Since 2005 it has promoted among small and medium-sized farmers the adoption of economically and environmentally viable integrated production systems, better technology for management of soil, water, and biological diversity, contributing to long-term sustainability of the country’s agricultural development. The project channeled financial resources and technical assistance to individual farmers and groups of farmers interested in developing farm projects. The project funded 5,300 farm projects throughout the country, 86 % of them for small farmers. Some 28,000 persons were direct beneficiaries, and 600 experts were trained in sustainable development and integrated natural resources management. In addition, the project achieved coordination of more than 160 institutions.
Programmatic Reform Implementation Development Policy Loan Supported the government’s program and granted a line of additional financing to cope with the impact of the international economic crisis, especially reinforcing the social protection systems. It was the first time that the World Bank issued a local-currency bond for consecutive disbursement of a specific loan. It was also innovative in the sense that the Bank was the first foreign issuer of a public bond in Uruguayan pesos, which reduced the cost of financing and increased the diversification of the public debt and the pension fund portfolios.
Third Project for Support to Uruguayan Public Schools has permitted the creation (by construction and/or rehabilitation) of 170 full-time schools, increasing coverage to 47,000 places. More than 50% of them are in unfavorable or very unfavorable sociocultural contexts. In 2012, the failure rate in full-time schools from first to sixth grades was 5.7 % below the national rate (6.1%).